Located four miles north of Healy in the Denali Borough, Lignite lies on the George Parks Highway at mile 363.3 of the Alaska Railroad. It lies at approximately 63° 54' N Latitude, 149° 01' W Longitude . The community is located in the Nenana Recording District. The area encompasses 58 sq. miles of land and 0 sq. miles of water.
Lignite is the name of a railroad station first reported in the 1922 railroad timetable. The name is derived from the lignite coal found in the area. The station was originally named "Dry Creek."